Nine months into it and getting ready for the next go-round, I thought it might be beneficial to take a look back and see what progress has been made on the Affordable Care Act. There are many perspectives from which to evaluate the situation, and many will vary in their assessment. This article attempts to take an unbiased view and make an accurate assessment.
First of all, the implementation was a near disaster. Frustrated customers, frustrated carriers, frustrated providers. . . Obamacare couldn’t have generated more frustration if that had been the primary objective. Now that most of the dust has settled, the exchanges are enrolling individuals, and customers are paying their premiums and obtaining coverage with their selected health plan and carrier. I am not aware of any major glitch in this process. It appears that this part of the marketplace is functioning well, even if with implementation bruises.
The rate update process for 2015 also appears to be working well. Most health plans are now more comfortable with the system. The oversight of the various insurance commissioners seems to be working better this year. Rates are being approved. And most things seem to be ready for the coming implementation in the fall.
For all practical purposes, the ability to offer a benefit program, publicize the rate in the marketplace, purchase it, enroll and make use of the benefits as needed seems to be working well. This is not a major improvement, just a catching up to what had been done before, outside this new marketplace. Yes, the plans are standardized (the metallic levels), and the rates are consistently made (through a combination of oversight and standard ACA age factors), which improve the marketplace and minimize some adverse selection. But for the most part this is just doing business a new way.
So, have there be any improvements? Are more people covered? Have inflationary trends gone down? Has coverage become more affordable?
The results so far are preliminary, hard to measure and somewhat variable from one market to another. However, based on my experience with carriers and health plans across the country, I have the following observations:
- 2015 rate increases will likely be less than in prior years is many markets; this is less the result of reductions in underlying healthcare trends and more the result of the lack of any major change in the underlying marketplace. Moving from a situation of being able to underwrite new members to one where no medical information can be used resulted in many carriers being conservative in their pricing for 2014. Because 2015 is merely an update from the prior year, the actual changes were less. One of the exceptions will be carriers who are phasing in the impact of ending the ACA catastrophic reinsurance program in 2017. I expect that most rate increases in most markets will be less than 10%.
- Pharmacy costs are increasing much more rapidly than previously anticipated. The introduction of Sovaldi for Hep-C patients has significantly affected those programs covering Hep-C patients. Although Sovaldi essentially provides a cure for Hep-C, the treatment cost for patients is about $90,000 over three months and is expected to increase to at least $120,000 as the updated combo drug is introduced later this year. This highly effective, yet costly, drug is one of many hitting the market that are driving up costs. This drug has nothing to do with ACA implementation but will be included in the assessment of ACA effectiveness because it was introduced post-ACA.
- The rolling of some Medicaid beneficiaries into the exchanges and the expansion of Medicaid in many states is having a significant impact for carriers operating in those markets. In one particular market, these changes are leading to severe financial challenges for carriers assuming the financial risk of these members in the exchange and in the managed care Medicaid program offered side by side to the ACA exchange. Apparent underfunding by the state and much higher-than-expected utilization and costs are leading to serious financial issues. These issues appear to be replicated in many markets nationally.
- The 3Rs (i.e., risk adjustor, risk corridor and reinsurance mechanisms) have yet to be included in financial results of health plans and carriers. Health plans are having to incorporate adjustments into this year’s financial results yet do not really know what the final adjustments will be. Some will have to establish premium deficiency reserves, others accruals for subsidies from ACA or payouts to ACA, adding much uncertainty to their operations. Boards are going to be less aware of financial results than in the past. Audits are going to be harder to complete and audit adjustments more common.
- Underlying inflationary trends do not appear to be lowering as a result of ACA. Unit cost increases appear to be as fast as before, and in some markets more rapid. There is increasing pressure from providers as health plans attempt to negotiate controlled or reduced rates. Health plans are pursuing narrower networks to get the deals they desire, with public pressure to continue to keep maximum choice. The conflict of health plan objectives of controlling costs and consumer pressure to maintain no restrictions is leading to increased costs. Logically, one would assume that there is a point where the consumer might be willing to utilize a more restrictive network at a lower price, but the general reaction is that we aren’t yet at that point. Even though we are experiencing the highest costs on the planet, the average consumer still desires unlimited choice. These same consumers complain about cost but are not willing to make personal changes to help reduce those costs.
- The numbers of individuals without health plan coverage has reduced slightly but has not yet approached targeted levels. We have not yet achieved coverage for all. In fact, we are not yet on a path to accomplish this.
- We have made some progress to bring healthcare to the table for discussion.
- We have re-arranged many of the insurance and health plan chairs on the Titanic-like health care system. We have avoided some icebergs this year, but it is not yet clear that we have clear sailing.
- The system is still subject to significant cost factors that are hard to control (such as Sovaldi), anticipate and plan for. These “icebergs” will continue in the future.
- The environment that our health plans are operating in is financially risky for them and will require high levels of cooperation with government oversight bodies (i.e., Medicaid departments, CMS and insurance departments).
- Although rate increases may be tempered somewhat this coming year, there is little evidence of any long-term tempering or reduction in underlying health carecosts or bending of the trend. Many attempts by the carriers (e.g., narrow networks) are not receiving adequate acceptance by the public and regulators.
